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World Currency Options

I’ve fielded quite a few questions lately about World Currency Options (WCOs), with several different factors driving people’s interest. For some folks, oil’s slide and the emerging-markets drop has gotten them thinking about those markets' relationships to the surprisingly plucky dollar. Others are following the foreign reaction to the now-international financial crisis and wondering about ways they can trade on their predictions. Still other folks are looking for a hedge for dollar-denominated savings or income – or just plain looking for a change-of-pace from one of the craziest equities markets in decades.

Whatever the reason, now seems like a good time to dig into World Currency Options, or WCOs. If you’re developing predictions about where various currencies are headed next, options traders can put those predictions into action immediately – without the hassle of opening a separate futures / currency trading account.

If you’re already familiar with options, these products will likely be pretty familiar to you, so you can start trading more or less immediately with minimal friction. The key concept to grasp is the answer to this question: how do you translate your currency predictions into a specific WCO play? What does a buying a call or a selling a put in this context mean? The PHLX’s FAQ puts the answer pretty nicely: offer U.S. dollar-settled world currency options, also known as FX options. Both exchanges do a solid job of describing their respective products, so I’d encourage you to check out both the links above for more info. Check out the